Image: Tina Tiller

Discovery has bought Three. What happens now?

After years of losses and months of speculation, Three has finally been sold. We speak to the MediaWorks CEO, and its broadcast operations’ new owner Discovery, about their plans for the channel.

This morning, the long-rumoured acquisition of MediaWorks’ broadcast operations (mainly Three, along with some extras) was formally announced, with US cable TV monster Discovery winning the rights to New Zealand’s biggest non-state-owned free-to-air channel. According to outgoing MediaWorks CEO Michael Anderson, the deal was in a due diligence phase before Covid-19 hit, which then scrambled it and forced a restart from scratch. 

It brings to an end a saga that has run for nearly a year, since news broke the channel was for sale, and in some ways since at least the Mark Weldon era – when TV3 (as it was then known) began a period of rapid transformation that saw some of its most popular stars leave and its public-facing emphasis shift from news, local drama and comedy towards multi-night locally made reality TV. That created content that could run in cross-promotion across radio, digital and outdoor, synergies that were a big part of the proposition to advertisers. 

The new owners are big (over US$11bn in revenue), successful (over US$1bn in profit) and multinational (present in all major TV markets around the world). 

Yet for all their scale and financial security, there remain a number of questions about what the new Three will look like. I’ve spoken to Anderson, company chair Jack Matthews (representing Oaktree, the longtime private equity owners) and Discovery APAC president Simon Robinson to try to make sense of what this means for its staff and audience.

MediaWorks CEO Michael Anderson (Photo: supplied)

What is Discovery, and what’s its plan here?

Discovery is a multinational media company, one which grew out of the channel of the same name, but now encompasses dozens of brands and hundreds of channels all over the world, including Animal Planet, Food Network, HGTV, TLC and the Oprah Winfrey Network. It has been in New Zealand for 26 years, operating six channels on Sky, and also has dozens of other channels internationally. Most are carried by pay TV and operate in some kind of niche, though it does own some more general interest and free-to-air channels in Europe. 

Discovery is essentially backing itself to take the long-term loss-making TV business and turn it around, presumably by filling out much of the schedule with content it already owns and creates elsewhere, and is therefore low-to-no cost. 

What it has said it will not do is abandon its commitment to news, or to local productions. The new operation will be overseen by Glen Kyne, who had been in the commercial director role – a well-liked staff member who provides leadership continuity in an executive that has seen a string of high-profile departures, including CEO Anderson and head of content Andrew Szusterman. 

What happens to Newshub?

This is perhaps the most pressing question – the fusing of all the company’s digital, TV and radio news services into one operation was the biggest project of Hal Crawford, the head of news who left earlier this year. Yet it remains a large and costly area of the business, and the single-biggest line item that could plausibly be shut down. 

According to Anderson, Discovery “has been very clear about the value of news” throughout the process, and Robinson said news was core to the brand’s value. It’s also instructive that MediaWorks – the name the remaining radio and outdoor advertising assets will still trade under – intends to contract with Newshub to continue supplying news bulletins for its radio stations. This includes its flagship AM Show, which will still run on both Three and Magic Talk. 

For all that, there is no guarantee that these words will translate into a long-term commitment to news in its current form. Newshub costs tens of millions a year to run, and while it has lost high-profile (and expensive) stars like John Campbell, Hilary Barry and Paul Henry in recent years, it remains an area that can find itself subject to the scrutiny of those trying to return a media business to profitability.

Three’s The Project (Photo: Three)

What will happen to Three’s local strategy?

When we spoke, Discovery’s Robinson noted that it operates in over 200 countries and spends US$4bn on content each year, with US$3bn outside of the company’s United States home base. 

The point being that it’s a global company and makes local content for local markets. This will be some comfort to both the local production sector, and to New Zealand on Air – each needs Three to stick around, and the more committed it is to local, the easier it will be to work with. 

That said, Robinson repeatedly emphasised that the priority for now is to “get the deal done” – the one thing that might destabilise it from here would be to make moves that would generate a significant and negative reaction from interested sectors. The upshot being that even if the new owners are intending to make major changes to programming, there is no incentive to reveal their hand now.

What happens to its reality TV shows?

This was the closest Robinson got to tipping his hat about a significant change. Through HGTV, Discovery has access to a large trove of home improvement-type shows – so why would it continue to buy the rights to The Block? This is one of the key ways Discovery can save money as a new owner – by reducing programming costs. Some of this will be by filling its schedule with overseas productions. But some could be by reducing the hefty licence fees paid to create New Zealand versions of formats like Married at First Sight and Dancing With the Stars. 

It’s not reality, but The Project is another format fee that heads to Australia (to Rove McManus, the genial host of 00s talk show Rove). There’s a chance the 7pm slot becomes the target of cost-savings, either by creating a new format around the current talent, or introducing a different product entirely.

Amy and Stu from The Block

How will the uncoupling from radio and outdoor impact the advertising business?

The word board chair Matthews uses to cover the splitting of radio and TV is “desynergise” – but he also says there is interest in the companies continuing to work together. This is obviously already happening across the news operation, but there is a strong incentive for pre-existing sales relationships, where multiple platforms are packaged up and sold together, to continue functioning.

Given that TVNZ and rival NZME have a close working relationship, there’s a good reason to keep close to combat that competition. Equally, Discovery’s six other NZ channels, which run on Sky, give additional inventory to work with. 

All sales are happening against the backdrop of a very difficult business environment. Robinson said that Discovery is entering the arrangement “with eyes wide open – we’re facing the same micro- and macro-economic challenges everywhere”. He also gamely tried to spin the difficulties media businesses are facing as a positive – because they were suffering before the pandemic, they know how to hunker down through crises, a skill he says not all sectors have. Which is certainly one way of framing it.



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